dbareis, you are correct. I'm not an android expert, but I watched enough Sesame street to recognize a red flashing light when its the only indicator on my otherwise lifeless phone.
My theory is that the red light
does indicate both a charging state and a state of battery depletion but is only used when the battery is too low to render an image on the display. This is based on what I experienced earlier today. I got my Nexus 4 today, do not have any special mods or customizations, am not rooted, etc.. Just standard app store fare like facebook and such. I have been using my phone all day. I was using it while it was charging via my laptop's USB port, and out of no where, it made a popping noise, the screen when black, and it became unresponsive. Power button did nothing, volume buttons did nothing. The only indication that it was working at all was a flashing red light below the screen, just above the USB port. I unplugged it from the laptop, and tried to power it on. Pressing the power button made a solid red light come on, but nothing on the screen. I plugged it into the laptop again, and got a red flashing light again. When the light stopped flashing (about 1-2 minutes later, pressing the power button would display a battery icon on the screen that seemed to indicate it was charging (battery progressing from empty to full) but no lightning bolt. I plugged it into the wall instead of the USB port and got the familiar lightning bolt. 1 minute later, it booted and indicated a 1% charge.
My only guess is that it wasn't charging faster than I was depleting it despite being plugged in, and the battery hit a critically low point. It didn't get any warnings, probably because it was charging and warnings about battery level are disabled while in a charging state, even if that charge isn't strong enough to stop the drain. As I never saw the right light at the same time as the batter icon on the screen, Its safe to say the red light may be used to offer a battery status when it doesn't have enough power to render an image on the screen. I am not certain what the difference is between the flashing and solid states, but from my brief and unexpected observation, flashing does indeed indicate it is charging, and solid means that it doesn't have enough power to render a more helpful status indicator on the screen.
I never trust a theory until I can prove it three times, and am reluctant to drain it again. Does anyone know for sure what the flashing red and solid red LED indicates?